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U.S.-China ‘Phase One’ agreement: Dairy benefits still unclear

Progressive Dairy Editor Dave Natzke Published on 15 January 2020

The signing of a “Phase One” trade agreement between the U.S and China provides encouragement that China will make additional purchases of U.S. agricultural products, but the full benefits for the U.S. dairy industry remain unclear.

According to U.S. dairy leaders, the agreement, signed Jan. 15, makes advances on nontariff issues. However, due to their significance, retaliatory tariffs remain an impediment to U.S. dairy exports, said officials with the U.S. Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF). They stress that trade negotiations with China will not be complete until the tariffs are fully lifted.

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“[The] progress on regulatory restrictions and other nontariff barriers hindering dairy trade is a positive step forward. These are important deliverables that USDEC has been pressing China for over the course of the last few years,” said Tom Vilsack, president and CEO of USDEC. “We need to continue to work with our government, China’s government and our customers to finish the job by lifting the remaining Chinese retaliatory tariffs against our exports.”

“America’s dairy farmers have been disproportionally harmed by China’s retaliatory tariffs, and we cannot ask our farmers to continue operating under this financial uncertainty,” said Randy Mooney, dairy farmer from Rogersville, Missouri, and chair of NMPF. Mooney joined President Donald Trump and administration officials at the White House signing ceremony. “We appreciate the hard work invested by both the U.S. and Chinese governments, but we urge China to swiftly lift all retaliatory tariffs against U.S. dairy products and work with U.S. suppliers to fulfill their purchasing commitment.”

The Phase One deal addresses China’s facility and product registration steps that have stymied U.S. exporting firms, improves the regulatory pathway for exports of infant formula and fluid milk (including extended shelf life milk), creates new transparency and due process obligations regarding geographical indications and common food names and promises increased purchases of U.S. agricultural goods, including dairy.

Left to be fully resolved is how China will fulfill its commitment to purchase large quantities of U.S. agriculture products, including dairy.

“Given the massive potential China has as an export market for dairy farmers and processors, a trade agreement that increases our opportunities there is a positive step,” said Brody Stapel, president of Edge dairy cooperative and an eastern Wisconsin dairy farmer. “The importance of the Chinese market to the dairy community grows by the day. Within the next few years, China will surpass the United States to become the world’s largest dairy market, reaching a value of $114 billion a year by 2024.”

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According to USDEC, China remains a valuable export market for U.S. dairy products, despite retaliatory tariffs. Over the 12-month period spanning December 2018 – November 2019, U.S. dairy exports to China totaled $377 million in sales. However, retaliatory tariffs on U.S. dairy products have steeply disadvantaged the U.S. industry compared to its competitors and contributed to a 47% decline in U.S. exports to China over that same period.

U.S. Rep. Collin Peterson (D-Minnesota), House ag committee chair, and Jim Costa of (D-California), chair of the panel’s livestock and foreign agriculture subcommittee, said the agreement should benefit U.S. farmers.

“My district produces everything from dairy, meat and poultry, to feed and pet food, to alfalfa and ethanol. This agreement appears to include positive structural changes and commitments that could increase access to the Chinese market for those and other products produced in districts across the country,” said Peterson. “The question now is whether China will play by the rules it has agreed to here. I’m also concerned that, long term, certain crops may not regain the foothold they lost in the trade war. If those purchases don’t materialize, I worry what effects that will have on the markets for crops like soybeans and sorghum.”

“It’s not immediately clear that these new purchases will make up for what we’ve lost along the way,” added Costa. “The key is getting the Chinese to stick to their commitments and prove that they will honor international agreements with Western democracies that live by rules-based economies.”  end mark

Dave Natzke
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